Just to give a data point. My largest recent position was INTC which had a very good run over the past couple of years (and it's great when a run like that benefits a portfolio) and I got very uncomfortable as it became about 10% of my portfolio. All of a sudden I found myself obsessing over that position, second-guessing, etc. I finally cut it back to about 5-6% of portfolio so it wouldn't be on my mind so much. I realized I got myself into a position where I wasn't thinking clearly about INTC as an investment, but was focusing on it because of it's size. That type scenario is what I'm trying to learn to better deal with.
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Position Trading - getting comfortable with size?
- Thread starter smili
- Start date
Just to give a data point. My largest recent position was INTC which had a very good run over the past couple of years (and it's great when a run like that benefits a portfolio) and I got very uncomfortable as it became about 10% of my portfolio. All of a sudden I found myself obsessing over that position, second-guessing, etc. I finally cut it back to about 5-6% of portfolio so it wouldn't be on my mind so much. I realized I got myself into a position where I wasn't thinking clearly about INTC as an investment, but was focusing on it because of it's size. That type scenario is what I'm trying to learn to better deal with.
and some of us find we like trading more than we like receiving a check each month
I admit that's part of it. I do enjoy the research and modelling - alot.
Yeah OK good point. knowing what your doing and having a well thought out plan should give you the confidence to have bigger positions. Just seems like his building his own more expensive version of an ETF thats all.
Jokobsberg, I feel like I should be comfortable w/ larger position sizes, but there's a disconnect between knowing what I want to do, executing it, and after executing it then not obsessing over the decision afterwards. Paul Tudor Jones (I think) in Market Wizards commented that sometimes he'd put on a long or short position just to see what it felt like to be on one side of a trade or another. That's what I'm coming up against - it feels different before and after - and size obviates this. I think I actually may become more risk averse after the position is put on than before when I'm considering it. I more easily see the downside after I'm invested with size (excess worry).
I would've thought this is a common problem. I've seen research that indicates most professional money managers don't allocate enough to to their best ideas (over-diversify).
I hear ya, not sure they have completely figured that in to the economic models, a lot of us are cutting back and living more simply now that we have our families raised, especially moving to a smaller house. yes, it may be the Zurich axioms, no big deal, just some writing about concentrated investments as opposed to diversified investments.Thanks for comments
I'm age 44, semi-retired. What we have is what's been saved/invested from a corporate jobs. We live pretty frugally and feel like we have enough saved for retirement. No debt. Cash-flow for day to day living is adequate (wife is a writer so that's most of income currently), though not extravagant. We're in process of downsizing from a home that is too big to also help lower our expense profile. I could go back to corporate if needed, but trying to start something new. We live pretty simply and don't need much.
man you sound like the perfect candidate for the 60/30/10 mix
hard these days at this time to put 30% in bonds, but preservation is different from making it
good luck and good talking to you and good question, hope you get some more helpful replies
I hear ya, not sure they have completely figured that in to the economic models, a lot of us are cutting back and living more simply now that we have our families raised, especially moving to a smaller house.
loyek, fwiw, I smiled at one of your posts because I also have my tomatoes growing in the back yard. If I had better space for it I'd have a big garden.
I had a very big garden on the farm, but now I live in an apartment in the city, and enjoy my little space out back even moreloyek, fwiw, I smiled at one of your posts because I also have my tomatoes growing in the back yard. If I had better space for it I'd have a big garden.
and I enjoy my small trading account more than I dreaded trying to make a living on my large trading account
hard to tell your kids, we can have new shoes if the USDA report is favorable
I appreciate your honest assessment. You described something every investor goes through. You know you should focus on relative performance yet you are influenced by dollar returns. There is no magic pill to change such thought process but ultimately you must force yourself to practice thinking in relative terms.
If your investment style yields positive returns then over time you should see the excess rewards over the occasional aggravation but still if you keep on psychologically influenced by absolute returns then you really should honestly evaluate whether putting your money at risk in financial markets is possibly a suboptimal choice.
If your investment style yields positive returns then over time you should see the excess rewards over the occasional aggravation but still if you keep on psychologically influenced by absolute returns then you really should honestly evaluate whether putting your money at risk in financial markets is possibly a suboptimal choice.
volpunter, thanks for comment.
The reason I ask the question is for tips on becoming comfortable with size.
To be clear, I've experienced large losses in individual securities. Gut punches. I understand the feeling. I don't like it. But loosing 30% of a $60K position feels very different to me than losing 30% of a $15K position, if that makes sense. I almost don't even take note of the latter and obsess over the former. I realize loses can easily exceed 30%, especially in bears like 2000-2003 and 2007-2009 markets. I will be wrong. Big losses will happen (I'm trying to be more careful about risk now than I was when I was younger - but I realize mistakes will happen).
Tips for how to handle this odd situation where the increased size of portfolio changes the way I think about the investments. I know on % terms the size shouldn't matter, but in the decision making process it seems to matter.
I really like your writing style and above thought process. Quite rare on this site. Organized and logical. Bravo.
Jokobsberg, I feel like I should be comfortable w/ larger position sizes, but there's a disconnect between knowing what I want to do, executing it, and after executing it then not obsessing over the decision afterwards. Paul Tudor Jones (I think) in Market Wizards commented that sometimes he'd put on a long or short position just to see what it felt like to be on one side of a trade or another. That's what I'm coming up against - it feels different before and after - and size obviates this. I think I actually may become more risk averse after the position is put on than before when I'm considering it. I more easily see the downside after I'm invested with size (excess worry).
I would've thought this is a common problem. I've seen research that indicates most professional money managers don't allocate enough to to their best ideas (over-diversify).